Pentagon looking for more savings after Orszag request

Defense contractors will see a much trimmer Pentagon budget next year if officials agree to terminate several significant programs following guidance from the Office of Management and Budget (OMB).

A memo from OMB Director Peter Orszag asks all government departments and agencies to outline at least five ìsignificantî terminations, reductions and savings initiatives in their fiscal 2011 budget plans that would bring costs below fiscal 2010 budget requests.

The Pentagon will likely start putting together its 2011 budget request as early as September. Congress is just now starting the process of approving the funding for fiscal 2010, which starts Oct. 1.

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Orszag said the White House’s request for savings comes amid an economic crisis and increasing pressure on the federal budget.

“Our country faces extraordinary challenges — from jump-starting our economy and rebuilding our infrastructure, to transforming our energy supply and slowing global warming, to reducing healthcare costs and expanding health insurance coverage, to educating our children and retooling our workforce, to fulfilling our obligations to our servicemen and -women and our veterans, and achieving diplomatic and military success overseas,” Orszag wrote in the Thursday memo.

The Pentagon is likely to lean on a sweeping review of military strategy and capability known as the Quadrennial Defense Review to determine possible budget savings.

Officials have said that the review will inform the Pentagon’s budget requests over the next five years and particularly in 2011.

The Pentagon also must submit a full-year estimate for the funds it will need in Iraq and Afghanistan.

For 2010, the Pentagon included $130 billion for the newly coined overseas contingency operations in its budget request. Overall, the Pentagon’s request totaled $664 billion.

The Pentagon and the other agencies have to show in their budget submissions for 2011 that they could handle two alternatives: a freeze of the budget at the 2010 request and a 5 percent reduction from the level for 2011 indicated in the 2010 request.

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The Pentagon’s request did not include any projection beyond 2010 because officials said the Quadrennial Defense Review will inform future requests.

However, the 2010 budget request contains several high-profile cancellations, such as the new presidential helicopter program, a second engine for the Joint Strike Fighter and a new Air Force combat search and rescue helicopter.